Proton has not ruled out any legal action against the previous management after a report may have showed mismanagement from 1996 until late 2005

Legal action a possibility: Proton

July 31 2006


PROTON Holdings Bhd says it is too early to decide whether any legal action would be taken against the previous management after a third party report may have showed mismanagement in the company's affairs from 1996 until late 2005.

However, Proton managing director Syed Zainal Abidin Syed Mohamed Tahir did not rule out the possibility of going to the courts.


"We are looking into details of the matter. For now, it is quite early to say whether there will be legal action," Syed Zainal told Business Times yesterday.


Syed Zainal said the national car maker may come out with a statement today to reply to a PricewaterhouseCoopers report on Proton, which was commissioned by Proton chairman Datuk Mohamed Azlan Hashim and the present management on September 2 last year. Azlan did not answer his mobile phone when contacted.


The report, revealed by a financial weekly and a foreign newspaper, pointed to one conclusion -- Proton's poor corporate governance in the past.


It mentioned some projects that were implemented without proper consultation or consent, billions in expenditure spent without in-depth discussion, and the board being unaware of legal problems.


Syed Zainal, who took office on January 1 this year, way before PricewaterhouseCoopers was hired to investigate Proton's past affairs, tried to downplay any legal outcome against the previous management led by Tengku Tan Sri Mahaleel Tengku Ariff.


"It is natural for the new management to find any weaknessess if it wants to improve the company. We do a lot of reviews on the (company's) current and past operations," he said.


Findings of the reports dated back to October 1996 when Proton bought a 63.75 per cent stake in Lotus Group International Ltd and included those related to investments in the Tanjung Malim plant, Italy's MV Agusta SpA, car ventures in China, PT Proton Tracoma Motors in Indonesia as well as research and development budgets and expenditure and potential troublesome operational issues.

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Car sales to drop by 8% this year, says MAA

Passenger car sales is now expected to contract by 8% this year on the back of higher interest rates and fuel prices as well as falling used car prices, the trade body, Malaysian Automotive Association (MAA) said.

This is a sharp contrast to its earlier projection of at least 3% growth for car sales. The downward revision comes after a 7% decline in car sales in the first half of the year (1H06).

The decline was inspite of the unveiling of National Automotive Policy (NAP) earlier this year that had removed a lot of uncertainties, but was more than offset by the other factors.

MAA president, Datuk Aishah Ahmad, said ironically, the NAP partly contributed to the decline in sales when it led to reduction in prices for completely knocked down units, but triggered a drop in resale values.

She said rising interest rates, more stringent approvals on hire purchase loans and shorter repayment periods were the other contributing factors.

Speaking at a media briefing in Petaling Jaya on July 27, on the TIV data for 1H06, Aishah expects the downward trend to moderate in the second half but at best, sales would remain at the same level as last year. She expects growth next year.

"We think the second half will improve as used car prices will be accepted," she said, adding that rising interest rates would not pose too much of a problem unless there was a big hike.

Aishah said the MAA had spoken to the government on providing incentives in the form of a certificate for people to trade in used cars of a certain age for scrap, in exchange for newer used cars.

MAA expects TIV to contract by 6% (versus earlier forecast of 3% growth) to 520,000 units this year from 551,042 units in 2005. Car sales are expected to decline by 8% from 400,835 units last year to 368,000 this year.

Commercial vehicles and four-by-four vehicles are expected to register a growth of 1% each to 114,000 units and 38,000 units, respectively.

In 1H06, total industry volume (TIV), which includes commercial and four-by-four vehicles, fell 5% to 248, 407 units from 261,111 units in 1H05.

Car sales fell 7% to 184,725 units in 1H06 from 199,554 units, while 45,464 units of commercial vehicles were sold, up 4% from 43,657 units.

Four-by-four vehicle sales were registered at 18,218 units in 1H06, up 1.77% from the same period last year when 17,900 units were sold.

Passenger car sales represented a 74% share of the total motor vehicle industry during 1H06, while commercial vehicle sales accounted for 18%.

Aishah said other ASEAN countries had experienced a slowdown in TIV during the first half as a result of high oil prices.

Indonesia faced the biggest contraction of 49% while the Thailand and the Philippines experienced declines of 3.2% and 3% respectively.

Proton to make 40,000-50,000 cars in FY07

Proton Holdings Bhd will maintain its target of producing between 40,000 and 50,000 cars for its financial year (FY) ending March 31, 2007 despite declining sales.

Its manufacturing director Datuk Kamarulzaman Darus believes that the production volume would be justified on the continued demand for Proton cars.

He added that Proton was also counting on demand from first-time buyers of cars.

“We will produce between 40,000 cars and 50,000 cars for this financial year from about 40,000 cars in FY06 despite the tougher car market environment,” Kamarulzaman told reporters after delivering 50 new Satria Neo cars to its customers in Tanjung Malim on July 27.

On the demand for Neo, he said orders had exceeded 2,000 units since its launch in June with over 1,000 cars delivered to its customers.

Kamarulzaman said Proton would launch a new model next year but did not elaborate.

He said the Tanjung Malim plant had a maximum capacity of 150,000 units on double shifts, and said the most popular models were the Gen-2 and Waja.

Kamarulzaman said the market was sluggish as customers were wary after the announcement of the National Automotive Policy and the new free trade agreement with Japan.

“Customers want to see if car prices might actually drop before wanting to buy new cars,” he said.

On Proton’s vendor consolidation programme, Kamarulzaman said the national car company was on track to reduce its vendors to no more than 50 from 275 vendors currently.

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Sluggish car sales hit component makers

PETALING JAYA: Car component makers are bracing themselves for tough times ahead with reports of a glut of 250,000 cars in the market.

An industry source revealed that about three-quarters of the 300-odd companies could cease operations if the situation does not improve by year's end.

“Most of these companies are highly dependent on Proton.

“The big component manufacturers are all right, but the small ones (low-end plastic component makers) which are mostly bumiputra-owned are in deep trouble with loans to pay and no business,” the source said.

On Saturday, Edaran Automobile Nasional Dealers Association of Malaysia said there were 800,000 cars for sale in the market, 250,000 more than usual, making it difficult for national car dealers to remain in business.

A source, who works for a component company, said several factors were causing a slow-down in production of cars especially in Proton.

“Financing costs have gone up, everything is up except for income.

“Malaysian buyers have also matured and this has affected the sales of Proton.”

It is learnt that Proton is only producing around 10,000 units per month compared to 15,000 to 16,000 units previously.

It is learnt that at a recent meeting, Proton told component manufacturers not to alert the media of the problems facing the industry.

“But there is no way we can keep it a secret. Eventually, the public listed companies must explain to the Securities Commission why there is no more profit,” the source said.

“Everyone is scaling down production and the only company maintaining theirs is Perodua with sales of the Myvi models doing well.”

Another source disclosed that a company producing spoilers and bumpers which used to operate two shifts a day had to cut its operations to one shift since June.

The source said if the situation persisted, its workers might be laid off.

Meanwhile, used car dealers are confident the glut will lead to car manufacturers offering incentives to customers to buy new cars.

Kuala Lumpur and Selangor Car Dealers and Credit Companies Association vice-president Dave Lim said this would allow the manufacturers to clear their stock.

“More importantly, the used car dealers are now ready to get new used cars to sell,” he said, noting that if new cars were not sold, the used car market would suffer.

“We have already made all the necessary adjustments in the past few months since the National Automotive Policy (NAP) was implemented.

“We have stopped accepting trade-ins and have since cleared our stocks.

“The only difference now is that we will be buying cheap and selling cheap as well.”

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